Law Audience Journal (e-ISSN: 2581-6705)

Authored By: Divyanshi Gaur, BSc LLB

The ED is an organization which is mandated with investigation of offences related to money laundering and violation of foreign exchange laws. It was established in the year 1956 as Enforcement Unit under Department of Economic Affairs. In 1957, it was renamed as ED. Presently it’s under administrative control of Department of Revenue (ministry of Finance). ED is responsible for enforcement of FEMA,1999, COFEPOSA,1974, PMLA,2002 , FEOA, 2018.

 ED has the power to attach assets of guilty of violation of FEMA. It has been empowered to undertake search, seizure, arrest against offences under PMLA. Under section 25 of the CVC act, 2003 it is appointed by central government on recommendation of chairperson-CVC and members of CVC, Secretary (home) ,secretary(DoPT) ,secretary (revenue) .

Amendment to PMLA ,2002:- In the previous act, ED would only investigate matters when person has been booked on grounds of money laundering by police or CBI. It means ECIR would not be filed by ED if a previous case of money laundering wasn’t booked against a person.

 But under new law, the ED can someone and arrest a person even if a prior case has not been booked against them by any agency . In the new act, if  a person is arrested for money laundering, then the onus would lie on accused to convince the magistrate that prima facie he or she is not involved in the case of money laundering. This is the only criminal act in India where accused does not have a presumption of innocence unless proven guilty.

In the new law statements made before ED will be admissible in a court of law.

This act was challenged in Vijay Madanlal Chaudhary versus Union of India (2022) the Supreme Court validated new law and said that presumption of innocence is not part of basic structure of Constitution especially if it is related to national security.

 If we refer to Maneka Gandhi versus Union of India case (1978), the Supreme Court had ruled that due process of law can only be exempted in case of national security. Therefore, the judgement of Supreme Court over PMLA 2022 ensures that on issues of national security, the court will accept the doctrine of executive supremacy.

 In the present circumstances, the ED has more special powers for investigation over CBI. So it is being hailed as super CBI because of the following reasons-

1. ED does not need consent of state for investigation or book, any person under money laundering act
2. The tenure of director, CBI and director of ED or similar .
3. The ED has more power in case of admissibility of evidence in the form of statement made before ED.
4. The doctrine of presumption of innocence applies in case of CBI, but not in case of ED investigation.

Limitations:-

A)Political interference :-Like CBI, the Director of ED can be given three extensions of one year each after completion of two-year tenure. But this can weaken the institution of ED in general and make the director vulnerable to influences of ruling party in particular . So if the extension of one year for three continuous years after review by government has the potential to undermine ED’s autonomy and make it work under political influence. Therefore, the security of tenure of two years and extension of three years at a time can reduce such potential for political interference .

1. B) Delayed investigation- an amendment should be made in law to ask ED to complete their probe in a time bound manner to increase the rates of convictions in corruption cases to close to 100% and follow the lead of developed countries such as Japan and Singapore, whose conviction rate in corruption cases was around 80% to enable the country to become corruption free.
2. C) Being Used for Ordinary Crimes:

PMLA is pulled into the investigation of even “ordinary” crimes and assets of genuine victims have been attached.PMLA was a comprehensive penal statute to counter the threat of money laundering, specifically stemming from trade in narcotics. Currently, the offences in the schedule of the Act are extremely overbroad, and in several cases, have absolutely no relation to either narcotics or organised crime.

D)ECIR isn’t provided to accused. This violates article 22 and even though the accused can file a plea under section 482 CrPC to quash the entire proceedings against him, it’ll be difficult to defend the offences to which the accused has no knowledge of since the copy of ECIR isn’t provided to accused. ECIR is considered as an “internal document” and not given to the accused. The ED treats itself as an exception to the principles and practices [of criminal procedure law] and chooses to register an ECIR on its own whims and fancies on its own file. Also, the initiation of an investigation by the ED has consequences which have the potential of curtailing the liberty of an individual.

1. D) Presumption of innocence until proven guilty isn’t upheld in cases filed under ED. But not all cases of money laundering effect national security. So accepting the doctrine of executive supremacy even in ordinary matters filed under ED is a serious violation of principles of natural justice and equity. It’s violative of due process of law under article 21 and is also discriminatory between economic offenders and other accused who have safeguards of law under the procedural and penal statutes.
2. E) Twin condition of bail – The burden of proof lies on the accused to prove that the accused fulfills the twin test stipulated under Section 45 of the PMLA, i.e. there are reasonable grounds for believing that the accused is not guilty of the offence of money laundering and that the accused is not likely to commit any offence while on bail. But in practical sense the accused can’t defend itself if there’s self incriminating evidence against him, which may/may not have been extorted by ED officers. This subjectivity of material evidence hampers accused rights under article 20(3) . The accused can even be punished under section 193 of IPC if he produces false evidence in ED statement. The accused doesn’t have the right to stay silent nor can he say untrue statements in ED inquiry. This is discriminatory to the protection provided to non economic offenders under section 24 and 25 of IEA,1872.Section 63 of PMLA states that information must be given by the accused, false information or no information will constitute another offence.

Compelling the accused to be a witness against themselves is violative of the right against self-incrimination.(article 20(3)).

In Vijay Madanlal Chaudhary versus Union of India (2022)-The SC upheld the constitutional validity of the PMLA and ED’s power to hold inquiries, arrest people and attach property (under Section 5 of the Act).

The Court stated that Section 5 provides for a balancing arrangement to secure the interests of the person and also ensures that the proceeds of crime remain available to be dealt with in the manner provided by the 2002 Act.

It rejected the argument that ED authorities are police officers and, hence, a statement recorded by them (Section 50 of the Act) would be hit by Article 20(3) of the Indian Constitution which says no person accused of an offence shall be compelled to be a witness against himself (self incrimination). A review petition has been accepted by the Honourable Supreme Court to challenge the validity of such provisions which are ultra vires of the Constitution. Additionally, the conviction rate of the ED under PMLA is very low, despite thousands of cases registered and people arrested.

According to the data quoted by the government in Parliament of India, there were zero convictions between 2005 and 2013-14.

By 2014-15 to 2021-22, out of 888 cases under ED, only 23 cases were under conviction. The low conviction rates in ED cases is proof of the ineffectiveness of twin condition in real sense which is only over burdening the prison infrastructure, since the accused can’t have access to anticipatory bail , and it’s difficult to have bail under such stringent conditions. So the accused even if he’s not convicted still stays in jail until the proceedings of the court is completed.

Conclusion

 ED  has  been given stringent  and huge blanket powers  in dealing with the accused that can increase the possibility of political misuse.

But the process itself should not become a punishment. ED’s expanded powers should be welcomed with a greater commitment to expeditiously resolve the cases, so both the judiciary and enforcement agencies can move forward with speedy trials and convictions and to also meet the  demands of international conventions and treaties signed by India.

There must be a constant scrutiny over the operations of the Enforcement Directorate and current disposition whether this clarification will improve the conviction rate.

The huge blanket powers of ED need to be viewed in par with the constitutional safeguards of the accused. There need to be checks and balances to the powers of ED to curtail it’s misuse because absolute power corrupts absolutely.

Cite this article as:

Divyanshi Gaur, “The Evolution of ED: From Enforcement Unit to being hailed as Super CBI”, Vol.5 & Issue 5, Law Audience Journal (e-ISSN: 2581-6705), Pages 251 to 267 (18^th April 2024), available at https://www.lawaudience.com/the-evolution-of-ed-from-enforcement-unit-to-being-hailed-as-super-cbi.